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Anna Karenina Principle' Explains Bodily Stress and Stockmarket Crashes 2 November 2010

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Anna Karenina Principle' Explains Bodily Stress and Stockmarket Crashes 2 November 2010 'Anna Karenina principle' explains bodily stress and stockmarket crashes 2 November 2010 (PhysOrg.com) -- A new theory that reveals the Nevertheless, the sample variance in the test group intrinsic mechanism of adaptation crises, from was 2.56 times higher, and the difference in the human adaptation to hard living conditions, to a correlations was huge: in the test group the bank collapse or stockmarkets going from boom to correlations were almost five times higher. bust has been put forward by a team of researchers from the University of Leicester. Many examples from human physiology support this observation: from the adaptation of healthy The novel study which has just been published, led people to a change in climate conditions to the by Professor Alexander Gorban of the Department analysis of fatal outcomes in oncological and of Mathematics, draws on his work on how humans cardiological clinics. adapt to hard living conditions - and applies it to economic systems. The same effect is found in the stock market. For example, in the dynamics of the 30 largest Working with colleagues at the Siberian Federal companies traded on the London Stock Exchanges, University, Russia, the researchers turned to many from 14/08/2008 to 14/10/2008 the correlations past experiments and observations of groups of increased five times and the variance increased humans, animals, trees, grassy plants, seven times. stockmarket prices, and changes in the banking sector. Gorban's work can explain what happens when resources are almost exhausted. He points out that Says Gorban: "In many areas, from physiology to one might see this as the "Anna Karenina principle" economics, to animal behaviour and ecological in action. In Tolstoy's novel, "All happy families are adaptation, scientists have to analyze groups of all alike; every unhappy family is unhappy in its own similar systems, whether cells, stock prices or way." Gorban suggests that, "All well-adapted trees adapting to pollution levels. systems are alike, all non-adapted systems experience maladaptation in their own way." "By studying the dynamics of correlation and variance in many systems facing external, or He added: "In the chaos of maladaptation, there is environmental, factors, we can typically, even an order. It seems, paradoxically, that as systems before obvious symptoms of crisis appear, predict become more different they actually become more when one might occur, as correlation between correlated within limits." individuals increases, and, at the same time, variance (and volatility) goes up." Gorban and his colleagues demonstrated the validity of this hypothesis for physiological This was demonstrated, for example, by an adaptation in 1987. In economics, others including analysis of the impact of emissions from a heat Longin and Solnik, Stanley and Mantegna and power station on Scots pine. For diagnostic collaborators, demonstrated the effect for the purposes some metabolites in needles are market in the mid-1990s. The latest analyses and measured. The test group of pines grow in the theoretical and experimental work of Gorban and emission tongue of the power station. The control his team suggests that it is a general principle for group was from a stand of the same age and forest adaptation of many kinds of systems under stress. type, growing outside the industrial emission area. No reliable difference was found in the test group Working with Elena Smirnova and Tatiana Tyukina, and control group average compositions. Gorban, Professor of Applied Mathematics, 1 / 3 describes a system for uncovering correlations in physiology that can be applied to economics for risk management and crisis prediction. The team has now come up with a general approach to explaining the dynamic effects in individuals as they adapt to new conditions regardless of the systems being observed or the specifics of the conditions. Their approach builds on an earlier idea known as 'adaptation energy' first put forward by the endocrinologist Hans Selye in the 1930s. He developed the concept of physiological stress and analysed the general adaptation syndrome. Selye's work alludes to our hidden reserves, our adaptation energy, that allow stresses to be overcome. Gorban and colleagues have used the metaphor of adaptation energy and applied it to a statistical analysis of economic systems. They successfully tested the predictions that emerge from this analysis on historical stockmarket data from 1000 US companies during the period 1994-1995 and to 30 major companies in the UK from 2006 to 2008. Adaptation energy as described by Selye, represents physiological resources that can be drawn on when an organism is under biological stress. Gorban and colleagues have demonstrated that the same notion can be applied to financial systems. This is not the end of the story. If the load increases further then the "order of maldaptation disorder" is destroyed and the systems progress to a fatal outcome in a fully disordered state. This conclusion is the complete realisation of the Anna Karenina Principle, Gorban says. More information: The research was published in the August 15 issue of the journal Physica A, (Vol. 389, Issue 16, 2010, pp 3193-3217). A preprint is also available online: arxiv.org/abs/0905.0129 Provided by University of Leicester 2 / 3 APA citation: 'Anna Karenina principle' explains bodily stress and stockmarket crashes (2010, November 2) retrieved 28 September 2021 from https://phys.org/news/2010-11-anna-karenina-principle-bodily- stress.html This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no part may be reproduced without the written permission. The content is provided for information purposes only. 3 / 3 Powered by TCPDF (www.tcpdf.org).
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